An energy deal will usher in new avenues in Dhaka-Kathmandu relations
Posted on May 29th, 2023

Sufian Asif

Energy cooperation between Nepal and Bangladesh is one of the most promising areas of cooperation. Plans to make power an exportable good are outlined in Nepal’s 15th Five-Year Development Plan (2019-2024). Nepal plans to grow its 1,250 MW of electricity production to more than 5,000 MW within the next five years, making it an energy-surplus country. The goal of Bangladesh is to invest, produce, and import surplus energy from Nepal. The fact that Bangladesh and India use more electricity during the summer, which is their busiest time of year, must be emphasized.

It is encouraging that Dhaka and Kathmandu, at their fifth Joint Steering Committee (JSC) meeting on May 16, which was held at the Payra Power Plant office in Patuakhali, decided to move forward with plans to implement agreements on buying electricity from Nepal using the already-existing interconnecting transmission lines through India, their neighbor. Notably, the JSC is a bilateral secretary-level organization promoting collaboration between Bangladesh and Nepal in the energy sectors. You might remember that both nations decided to ask India during the fourth JSC meeting, held in August of last year in Kathmandu, to permit the export of 40 to 50 MW of power from Nepal to Bangladesh via the high-voltage Baharampur-Bheramara cross-border transmission line.

The exploration of the prospect of setting up a joint venture hydropower plant in Nepal as well as importing 500 MW electricity from the Indian company GMR’s 900 MW Upper Karnali Hydropower Project situated in western Nepal, installing a new, dedicated cross-border  transmission line through a tripartite deal between Bangladesh, Nepal and India, potential government and private sector investments for the growth of the energy sector in both countries, were other notable outcomes of the recent energy talks.

A trilateral energy sales and purchase agreement between Bangladesh, Nepal, and India is required for any Dhaka-Kathmandu power transaction to be implemented because Bangladesh and Nepal do not have a direct land link. Both parties have acknowledged that the trilateral agreement’s strategic component is vital; otherwise, electricity exports to Bangladesh would just exist on paper.

It would be important to emphasize that agreements between Bangladesh and Nepal in the area of clean energy, namely hydropower, have a lot of promise.  The development of hydropower plants in Nepal under Bangladesh-Nepal joint venture projects was thoroughly reviewed by the two nations at the JSC meeting in light of these potential outcomes. According to information, the two parties agreed on the development of the 683 MW Sunkoshi 3 hydropower project in Nepal.

The Nepalese foreign minister stated at the gathering in Dhaka that the country has essentially an endless supply of roughly 60,000 MW of hydropower. In Nepal’s hydropower industry, India has been investing. As a neighbor, Bangladesh may work with Nepal to expand cooperation, particularly in the area of environmentally friendly, green hydropower, in order to fulfill its expanding energy needs. However, India’s support will be essential for any significant advancement in this area. It is hoped that India’s transnational green power grids program to supply power in its neighborhood will aid in the promotion of hydropower agreements between Bangladesh and Nepal.

Both hydropower in Nepal and gas in Bangladesh provide a bright future for development, and if used well, these two nations’ natural resources will experience tremendous growth. The two nations committed to working together on the construction of hydropower plants, transmission lines, and energy sector capacities when they signed an agreement on energy cooperation in August 2018. By 2040, Bangladesh will import hydropower from Nepal totaling up to 9,000 MW under the terms of this agreement. Both the then-energy minister of Nepal, Barsha Man Pun, and the state minister for power, energy, and mineral resources of Bangladesh, Nasrul Hamid, signed the agreement. Pun had said, “This agreement has opened up a new door for the growth of the hydropower sector in Nepal,” after it was signed.

The power industry offers further opportunities for collaboration between the two nations.  For instance, Bangladesh possesses institutional resources, such as the Bangladesh Power Management Institute (BPMI), that can be used to train human resources and so increase the ability of the power sector workers in both nations. The knowledge of solar house and net metering operations may be shared in other power sector domains. In particular, there should be considerable consideration given to private sector investment from Bangladesh in Nepal’s hydropower industry. The good news is that all of these topics were discussed extensively at the aforementioned secretary-level meeting between the two nations.

The promise of commercial cooperation between Bangladesh and Nepal is not limited to the hydropower industry. The two nations may collaborate to their mutual advantage in a wide range of industries.

Economic Cooperation

Despite tremendous opportunities brought forth by the two countries’ close proximity and outstanding bilateral relations, their economic relationships have stagnated over time. The potential to advance bilateral investment and commerce is enormous. Lentils, oil, cardamom, wheat, vegetable seeds, handicrafts, pashmina, and other agricultural goods are some of Nepal’s most important exports to Bangladesh. On the other hand, the majority of Nepal’s imports from Bangladesh are industrial raw materials, pharmaceuticals, chemicals, textiles and apparel, jute products, and electrical and electronic goods.

In order to enhance bilateral commerce and business, the private sectors and business communities of both nations have been actively interacting. They have also organized several business exhibitions and fairs. The main trade associations of the two nations, the Federation of Bangladesh Chambers of Commerce and Industry and the Federation of Nepalese Chambers of Commerce and Industry, have institutional frameworks for cooperation.

Another crucial area that plays a major role in bilateral relations between Nepal and Bangladesh is education. In all, 4,000 Nepalese students attend universities in Bangladesh to study medical, engineering, law, and other courses, while Bangladeshi students attend universities in Nepal to study fine arts and development studies, among other things. More opportunities will become available as a result of the mutual concordance and accreditation of each other’s university degrees as well as the affiliation of more colleges and universities in the future.

At the ports of Chittagong and Mongla, the government of Bangladesh has granted Nepal transit privileges. The overland trade route to Bangladesh from Kakarbhitta to Phulbari and Banglabandha has been operational since September 1997. The Bangladeshi government consented to include Rohanpur as a port of call in the Nepal-Bangladesh Transit Agreement on August 10, 2020. The Rohanpur-Singhabad railway route was designated as an extra transit route for traffic-in-transit movement between Nepal and Bangladesh as well as third-country transit trade when Nepal and Bangladesh and Bangladesh signed an Exchange of Letters on March 22 and 23 of 2021.

Nepal and Bangladesh have not been able to convert their bilateral relationships into mutually advantageous economic cooperation despite being geographically close and being members of the SAARC, BBIN, and BIMSTEC. Trade, investment, connectivity, energy cooperation, education, and tourism are just a few examples of the many opportunities. Since India is not only the region’s largest economy but also the only country that is physically located between Dhaka and Kathmandu and does not share a border with either Nepal or Bangladesh, the two governments must convince India of the value of sub-regional cooperation in South Asia where India serves as a facilitator. 

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